Which of the following activities would be classified as an investing activity? a. Cash received from interest revenue. b. Cash paid (loaned) to a borrower as a loan. c. Cash received from dividend revenue. d. Cash paid to reacquire capital stock. | Homew (2024)

FAQs

Which of the following activities is classified as an investing activity? ›

Investing activities include purchases of physical assets, investments in securities, or the sale of securities or assets. Negative cash flow from investing activities might not be a bad sign if management is investing in the long-term health of the company.

Investing activities can include:

Acquisitions of other businesses or companies. Proceeds from the sale of other businesses (divestitures) Purchases of marketable securities (i.e., stocks, bonds, etc.) Proceeds from the sale of marketable securities.

Answer and Explanation:

The correct option is (a) Purchase of equipment. Investing activities are related to procurement and sale of fixed assets and long-term investment.

Therefore, interest and dividend earned will be income from investing activities and purchase of machinery will be outflow of cash.

Investing activities include making and collecting loans, purchasing and selling debt or equity instruments of other reporting entities, and acquiring and disposing of property, plant, and equipment and other productive assets used in the production of goods or services.

Investing activities include the purchase or sale of long-lived assets used in operating the business, or the purchase or sale of investment securities. What are financing activities? The primary types of financing activities are borrowing money, issuing shares of stock, and paying dividends.

The purchase of another company's stock is an example of an investing activity. Cash flows from financing activities include the payment of interest on a note payable.

Cash inflows (proceeds) from investing activities include:

Cash receipts from interest and dividends received as returns on loans (except for program loans), debt instruments of other agencies, equity securities, and cash management or investment pools.

Purchase and sale of fixed assets are investing activities. Other activities would include purchase or sale of investment instruments where business invests their surplus reserves. Purchase of an equipment would result in a cash outflow and hence would be classified as cash outflow from investing activities.

Option A: Selling goods and services is the correct option

Sales of goods and serviced are the normal operating activity of the business and recorded under the operating activities.

Which of the following is reported as an investing activity in the statement of cash flows? ›

The correct option is B. Cash payments to acquire new equipment. Investing activity is a section of the cash flow statement concerning the cash inflows and outflows for long-term assets. Equipment in the balance sheet is classified as a long-term asset hence this is part of the investing activity.

An investment can refer to any mechanism used for generating future income. This includes the purchase of bonds, stocks, or real estate property, among other examples. Additionally, purchasing a property that can be used to produce goods can be considered an investment.

The correct answer is A.

The issuance of common stock is a financing activity, not an investing activity.

Option A: Selling goods and services is the correct option

Sales of goods and serviced are the normal operating activity of the business and recorded under the operating activities. However, sales of goods and services are recorded in operating activities.